Anticipatory Breach Material Breach

Black’s Law Dictionary defines a breach of contract as a “[v]iolation of a contractual obligation by failing to perform one’s own promise, by repudiating it, or by interfering with another party’s performance.” The Second Restatement of Contracts elaborates further: “A breach may be one by non-performance, or by repudiation, or by both. Every breach gives rise to a claim for damages, and may give rise to other remedies. Even if the injured party sustains no pecuniary loss or is unable to show such loss with sufficient certainty, he has at least a claim for nominal damages. If a court chooses to ignore a trifling departure, there is no breach and no claim arises.” More simply put, a breach of contract is an unjustified failure to perform an absolute contractual duty.

– Types of Breach –

There are several main types of breach of contract. They include the following:

(1) An active breach of contract is the negligent performance of a contractual obligation, to the point of acting outside the contract’s terms.

(2) Anticipatory breach, or constructive breach, is a breach of contract caused by a party’s anticipatory repudiation. An example of anticipatory repudiation is when a party clearly indicates that it will not perform when performance is due. Under these circumstances, the innocent party may treat the repudiation as an immediate breach and sue for damages at once. Alternatively, the innocent party may wait until the time of performance has arrived, and then ask the other party to perform. If he chooses the second option, he risks that the contract may become frustrated in the mean time, in which case he will have lost his right to damages.

(3) A material breach is a breach that is significant enough to permit the injured party to treat the breach as total, therefore excusing that party from further performance and affording it the right to sue for damages. The following circumstances are considered when determining materiality: “(a) the extent to which the injured party will be deprived of the benefit which he reasonably expected; (b) the extent to which the injured party can be adequately compensated for the part of that benefit of which he will be deprived; (c) the extent to which the party failing to perform or to offer to perform will suffer forfeiture; (d) the likelihood that the party failing to perform or to offer to perform will cure his failure, taking account of all the circumstances including any reasonable assurances; (e) the extent to which the behavior of the party failing to perform or to offer to perform comports with standards of good faith and fair dealing.”

(4) A partial breach is less significant than a material breach and gives the aggrieved party a right to damages, but it does not excuse that party from performance.

(5) Finally, a total breach is a breach of contract for which the remedial rights provided by law are substituted for all the existing contractual rights, or can be so substituted by the injured party; esp., a material breach that gives rise to a claim for damages based on the aggrieved party’s remaining rights to performance under the contract.

Sources:

Restatement (Second) of Contracts § 236 cmt. a (1979).

Black’s Law Dictionary (9th ed. 2009).

P.S. Atiyah, An Introduction to the Law of Contract 298 (3d ed. 1981).